Medium-sized businesses in Germany have to reckon with significantly lower sales due to the Corona crisis. Every sixth company therefore cuts jobs. According to a KfW study, 1.1 million jobs could be lost.
As a result of the Corona crisis, medium-sized companies in Germany are cutting numerous jobs. According to a study by the state development bank KfW, medium-sized companies could cut up to 1.1 million jobs this year. Accordingly, 16 percent of medium-sized companies said they would reduce the number of jobs as a result of the pandemic in order to cut costs. On average, they want to do without one in five employees.
However, around two thirds of medium-sized companies also stated that they would keep the number of employees stable despite the crisis. In 2019, the number of employees in medium-sized businesses reached a record 32.3 million. The now emerging decline corresponds roughly to the number of jobs that had been newly created in the three previous years.
Sales will decline sharply
As a result of the crisis, more than half of the companies expect a drop in sales. Overall, medium-sized companies’ revenues could therefore shrink by 545 billion euros this year. That would correspond to a minus of twelve percent. Many medium-sized companies are also reacting to the falling sales with cuts in investments, which had reached a high of 187 billion euros in 2019. Many investment projects are now being put on hold, wrote KfW in its study.
“Despite the comfortable starting position of most medium-sized companies in Germany, the corona crisis will leave its mark,” said KfW chief economist Fritzi Köhler-Geib. The consequences of the pandemic would be reflected not only in the balance sheets of companies, but also in the minds of managers. “Caution and restraint could determine the actions of many in the coming period.”
More liquidity eases the situation
The KfW study also shows that many companies are better prepared for the consequences of the pandemic. In the event of another lockdown, every third medium-sized company would currently see itself equipped with sufficient reserves, said Köhler-Geib. Another 28 percent said they had sufficient reserves for six to twelve months. “Overall, medium-sized companies in Germany have a high level of financial resilience. In recent years, companies have built up a high level of equity, from which they now benefit.”